How corruption and bad policies are strangling South Africa

THE sprawl of cranes around Sandton, South Africa’s swanky financial district, and a dearth of empty beds in Cape Town, its tourist Mecca, point to an economy that shows some signs of rebounding from a deep slump earlier this year. Taken individually many indicators are buoyant: good rains mean that farmers are likely to plant 35% more maize this year; a weak rand has encouraged a 20% jump in the number of international tourists.

Yet add these numbers up and the equation still turns out badly: the economy will be lucky to limp in with growth about 0.5% this year and will not do very much more than 1.5-2% over the next few years. This is a percentage point or two below the long-run trend rate of 3%.

So what explains this black hole in the economy? The answer is almost entirely poor governance by Jacob Zuma, a president who may soon face 783 charges of fraud, corruption and racketeering.

Foolish policies play a part. Take tourism. Although the number of holiday-makers has soared, the government itself reckons that there ought to have been many more bottoms on South African beaches. Thousands have been turned away by absurdly strict rules requiring families to carry birth certificates for their children. But corruption is also hurting the economy. A recent report by an ombudsman revealed details of how the government and Eskom, the state-owned power monopoly, muscled an international mining company into selling a coal mine to friends of the president.

The effect of mismanagement and corruption is best seen in measures of business confidence and the currency, both of which have plummeted since the start of Mr Zuma’s presidency in 2009 (see chart). Investment has fallen to 20% of GDP from 23% over the same period.

With growth so slow, credit-rating agencies fret that the country may struggle to repay its debts. Moody’s, which in May said it was minded to cut its rating, was due to deliver a verdict on November 25th. Standard and Poor’s, which rates the country’s debt one notch above junk, will give its assessment a week later. Some 80% of economists polled by Bloomberg, a news agency, expect the ratings firms to downgrade South Africa in the next year.

The threat of a rating cut is prompting feverish attempts to open up the economy by Pravin Gordhan, the respected finance minister. On November 20th the deputy president, Cyril Ramaphosa, announced a new national minimum wage of 3,500 rand ($247) a month in a bid to get unions to agree to labour-law reforms that would make it harder for them to call strikes of the sort that shut down the country’s platinum mines for almost half of 2014. The chief executives of major banks are also involved in efforts to liberalise the economy by, among other things, getting big firms to agree to hire hundreds of thousands of youngsters on one-year internships. “In the last year South Africa’s reformist voices have been ascendant,” says Goolam Ballim, an economist at Standard Bank. “After almost a decade of political and economic drift, 2016 may yet prove to be the inflection point...in confidence and investment.” But without better leadership, such optimism is likely to prove short-lived.